2011-07-20 07:30:00 CEST
2011-07-20 07:31:27 CEST
REGULATED INFORMATION
Wärtsilä - Interim report (Q1 and Q3)
WÄRTSILÄ INTERIM REPORT JANUARY-JUNE 2011
Wärtsilä Corporation INTERIM REPORT 20 July 2011 at 8.30 a.m. local time
ORDER INTAKE AND PROFITABILITY IMPROVED
SECOND QUARTER HIGHLIGHTS
- Order intake grew by 5% to EUR 1,170 million (1,117)
- Net sales decreased 8% to EUR 1,036 million (1,131)
- Operating result EUR 117 million, or 11.3% of net sales (EUR 117 million and
10.4%)
- Earnings per share amounted to EUR 0.39 (0.43)
- Book-to-bill increased to 1.13 (0.99)
HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-JUNE 2011
- Order intake EUR 2,149 million (1,998), an increase of 8%
- Net sales increased to EUR 2,119 million (2,052), 3%
- Operating result increased to EUR 230 million (211), 10.9% of net sales (10.3)
- At the end of the period the order book totalled EUR 3,779 million (4,315),
-12%
- Earnings per share amounted to EUR 0.78 (0.77)
- Cash flow from operating activities EUR 84 million (270)
The operating result and earnings per share are shown excluding nonrecurring
items. Wärtsilä recognised EUR 9 million (12) of nonrecurring items related to
restructuring measures during the second quarter and EUR 12 million (56) of
nonrecurring items during the review period January-June 2011.
OLE JOHANSSON, PRESIDENT AND CEO:"The second quarter was good in terms of ordering activity and profitability.
While net sales decreased somewhat, the solid order intake paves the way ahead.
For the first time since 2008, we booked more new orders than we billed for. In
Ship Power there is positive development in various LNG fuelled vessel markets.
Power Plants also received major orders in new markets for gas-based solutions
and our "Smart Power Generation" -concept is being recognised. The Services
business was stable. The growth of the global economy appears at risk of slowing
down, which may impact decision making for new investments. It may also affect
the utilisation of the existing marine fleet. Due to this uncertainty, as well
as the timing of power plant deliveries, we have revised our net sales
expectation to a slight decline compared to last year. Our profitability is
expected to remain on the guided level."
WÄRTSILÄ'S PROSPECTS FOR 2011 REVISED
Due to weaker than expected marine service markets and the timing of power plant
deliveries, Wärtsilä expects its net sales for 2011 to decline by 0-5% compared
to last year. We reiterate our expectation that operational profitability (EBIT%
before nonrecurring items) will be around 11%.
ANALYST AND PRESS CONFERENCE
An analyst and press conference will be held on Wednesday 20 July 2011, at
10.45 a.m. Finnish time (8.45 a.m. UK time), at the Wärtsilä headquarters in
Helsinki, Finland. The combined web- and teleconference will be held in English
and can be viewed on the internet at the following
address:http://storm.zoomvisionmamato.com/player/wartsila/objects/s8qztnc3/.
To participate in the teleconference please register at the following address:
http://www.yourconferencecentre.com/r.aspx?p=1&a=DwceDNGpzRRGrV.
You will receive dial-in details by e-mail once you have registered. If you want
to ask questions during the teleconference, press the *-button followed by the
1-button on your phone to register for a question and the # -key to withdraw a
question. The event name is: Wärtsilä Interim Report Q2 2011. Please be ready to
state your details and the name of the conference to the operator. If problems
occur, please press the *-button followed by the 0-button.
An on-demand version of the webcast will be available on the company website
later the same day.
For further information, please contact:
Raimo Lind
Executive Vice President & CFO
Tel: +358 10 709 5640
raimo.lind@wartsila.com
Pauliina Tennilä
Director, Investor Relations
Tel: +358 40 570 5530
pauliina.tennila@wartsila.com
For press information, please contact:
Atte Palomäki
Group Vice President, Communications & Branding
Tel: +358 40 547 6390
atte.palomaki@wartsila.com
Wärtsilä in brief
Wärtsilä is a global leader in complete lifecycle power solutions for the marine
and energy markets. By emphasising technological innovation and total
efficiency, Wärtsilä maximises the environmental and economic performance of the
vessels and power plants of its customers. In 2010, Wärtsilä's net sales
totalled EUR 4.6 billion with approximately 17,500 employees. The company has
operations in 160 locations in 70 countries around the world. Wärtsilä is listed
on the NASDAQ OMX Helsinki, Finland.
INTERIM REPORT JANUARY-JUNE 2011
This interim report is unaudited. All share related financial ratios and their
comparison figures have been calculated based on the new amount of shares.
SECOND QUARTER 4-6/2011 IN BRIEF
MEUR 4-6/2011 4-6/2010 Change
Order intake 1 170 1 117 5%
Net sales 1 036 1 131 -8%
Operating result 117 117 0%
% of net sales 11.3% 10.4%
Profit before taxes 108 109
Earnings/share, EUR 0.39 0.43
REVIEW PERIOD JANUARY-JUNE 2011 IN BRIEF
MEUR 1-6/2011 1-6/2010 Change 2010
Order intake 2 149 1 998 8% 4 005
Order book end of period 3 779 4 315 -12% 3 795
Net sales 2 119 2 052 3% 4 553
Operating result 230 211 9% 487
% of net sales 10.9% 10.3% 10.7%
Profit before taxes 215 158 548
Earnings/share, EUR 0.78 0.77 1.68
Cash flow from operating activities 84 270 663
Interest-bearing net debt
at the end of the period 64 328 -165
Gross capital expenditure 44 36 98
The operating result and earnings per share are shown excluding nonrecurring
items. Wärtsilä recognised EUR 9 million (12) of nonrecurring items related to
restructuring measures during the second quarter and EUR 12 million (56) of
nonrecurring items during the review period January-June 2011.
MARKET DEVELOPMENT
SHIP POWER
A shift in the mix of vessels contracted
During the second quarter of 2011, vessel contracting activity continued to be
stable at around 100 vessels per month. Contracting activity for certain types
of merchant vessels, such as bulk carriers and tankers, declined while activity
was buoyant for containerships and gas carriers. This development in the
merchant market, coupled with strong contracting activity in the offshore
markets and good activity in special vessels, means that the mix of vessels
contracted during 2011 has clearly shifted towards specialised tonnage. This
situation is expected to remain unchanged throughout the remainder of the year.
Asian yards continue to dominate the shipbuilding industry, having secured 89%
of the global contracts signed during 2011, with China and Korea each gaining
about 40% of all global contracts. Notably, Chinese yards were able to secure
important orders for containerships, a segment traditionally dominated by Korean
yards.
Ship Power market shares
Wärtsilä's share of the medium-speed main engine market increased to 44% (42% at
the end of the previous quarter). The market share in low-speed engines
increased to 17% (11). This increase is a reflection of good order intake during
2011, especially in China. In the auxiliary engine market Wärtsilä's share was
3% (3).
POWER PLANTS
Power plant markets remain solid
Market activity continued at a good level during the second quarter of 2011.
Increasing industrial output in most emerging markets drove the demand from
independent power producers (IPP's), utilities and industrial customers. The
financial crisis led to the postponement of investments for power generation in
2009 and 2010, and this is now creating demand in several markets.
Power Plants market position
In 2010, the overall market for gas and liquid fuel based power generation was
approximately 57,000 MW. This includes all prime mover units of over 5 MW.
Wärtsilä's share represented 5.6% of the market. This makes Wärtsilä the fourth
largest supplier of gas and liquid fuel based power plants. With its unique
value proposition, Wärtsilä aims at strengthening its position in the gas based
power plant market by capturing market share from other technologies.
SERVICES
Service market stable
The service market was stable during the second quarter of 2011. The offshore
markets showed high activity and activity in the container markets was on a good
level. The tanker and especially the bulker markets were somewhat slow. Interest
in various operations, maintenance and technical service agreements is growing
as customers increasingly focus on ensuring cost effective and energy efficient
operations as well as the high reliability of their installations.
ORDER INTAKE
Book-to-bill ratio exceeds one
Wärtsilä's order intake for the second quarter totalled EUR 1,170 million
(1,117) an increase of 5%. In relation to the previous quarter Wärtsilä's order
intake increased 20% (EUR 979 million in the first quarter of 2011). The book-
to-bill ratio for the second quarter was 1.13 (0.99).
Ship Power's order intake for the second quarter totalled EUR 306 million (213),
up 44%. Compared to the previous quarter, order intake was up 77% (EUR 173
million in the first quarter of 2011). During the second quarter, Wärtsilä
received several significant orders for the delivery of total solutions,
including ship design, propulsion machinery, automation and other equipment.
Many of these vessels will be equipped with Wärtsilä dual-fuel engines
underlining the company's frontrunner position in gas applications. The Offshore
segment continued to be active with a 54% share of total orders during the
second quarter, followed by the Merchant segment with 19% of all orders. Special
vessels and Navy orders were 12% and 9% respectively. Ship Design represented a
3% share, and Cruise & Ferry a 2% share of the total.
The order intake for Power Plants in the second quarter totalled EUR 419 million
(437), which was 4% less than for the corresponding period last year. Compared
to the previous quarter, the Power Plants order intake increased 66% (EUR 253
million in the first quarter of 2011). During the second quarter, Wärtsilä
received a 250MW turnkey project order from Estonia and a 180MW order from South
Africa, both of which rely on key characteristics of the Wärtsilä Smart Power
Generation concept. Other significant orders were received from Timor-Leste and
Saudi-Arabia.
Order intake for the Services business totalled EUR 444 million (465) in the
second quarter, a decrease of 5% from the corresponding period 2010. Compared to
the previous quarter, order intake decreased 20% (EUR 551 million in the first
quarter of 2011). During the second quarter, Wärtsilä was awarded a five-year
technical management contract, based on Dynamic Maintenance Planning, covering a
total of 24 Wärtsilä 50DF dual-fuel engines in six LNG carriers. The contract
was placed by the operator of the vessels, Ceres LNG Services Ltd, a Greek ship
management company and a major marine services provider in LNG shipping.
The total order intake for the review period January-June 2011 was EUR 2,149
million (1,998), which represents an increase of 8% compared to the
corresponding period 2010. The book-to-bill ratio for the review period was
1.01 (0.97). Ship Power's order intake was EUR 479 million (303), an increase
of 58% from the corresponding period last year. Power Plants' order intake was
EUR 672 million (704), which is 4% lower than in 2010. Services' order intake
for the review period totalled EUR 995 million (988), an increase of 1% over the
corresponding period in 2010.
Second quarter order intake by business
MEUR 4-6/2011 4-6/2010 Change
Ship Power 306 213 44%
Power Plants 419 437 -4%
Services 444 465 -5%
Order intake, total 1 170 1 117 5%
Order intake Power Plants
MW 4-6/2011 4-6/2010 Change
Oil 355 1 021 -65%
Gas 450 14 3 045%
Order intake for the review period by business
MEUR 1-6/2011 1-6/2010 Change 2010
Ship Power 479 303 58% 657
Power Plants 672 704 -4% 1 413
Services 995 988 1% 1 931
Order intake, total 2 149 1 998 8% 4 005
Order intake Power Plants
MW 1-6/2011 1-6/2010 Change 2010
Oil 615 1 100 -44% 1 797
Gas 872 374 133% 1 377
Renewable fuels 19 -100% 1
ORDER BOOK
The total order book at the end of the review period stood at EUR 3,779 million
(4,315), a decrease of 12%. In relation to the previous quarter Wärtsilä's order
book increased 3% (EUR 3,669 million in the first quarter of 2011). The Ship
Power order book stood at EUR 1,753 million (2,157), which is 19% lower than at
the same date last year. At the end of the review period, the Power Plants order
book amounted to EUR 1,265 million (1,438), a decrease of 12%. The Services
order book totalled EUR 761 million (720) at the end of the review period,
representing an increase of 6%.
Order book by business
MEUR 30 June 2011 30 June 2010 Change 31 Dec. 2010
Ship Power 1 753 2 157 -19% 1 825
Power Plants 1 265 1 438 -12% 1 299
Services 761 720 6% 671
Order book, total 3 779 4 315 -12% 3 795
NET SALES
Wärtsilä's net sales for the second quarter decreased by 8% to EUR 1,036 million
(1,131) compared to the corresponding period last year. Net sales for Ship Power
totalled EUR 223 million (276), a decrease of 19%. Power Plants' net sales for
the second quarter totalled EUR 360 million (390), which is 8% lower than in the
corresponding quarter last year. The second quarter net sales for Services
amounted to EUR 452 million (463), a slight decrease of 2%.
Wärtsilä's net sales for January-June 2011 rose by 3% and totalled EUR 2,119
million (2,052). Ship Power's net sales decreased by 7% and totalled EUR 517
million (554). Net sales for Power Plants totalled EUR 710 million (627), an
increase of 13%. Net sales from the Services business increased 2% from last
year and amounted to EUR 890 million (872). Ship Power accounted for 24%, Power
Plants for 34% and Services for 42% of the total net sales.
Of Wärtsilä's net sales for January-June 2011, approximately 71% was EUR
denominated, 12% USD denominated, with the remainder being split between several
currencies.
Second quarter net sales by business
MEUR 4-6/2011 4-6/2010 Change
Ship Power 223 276 -19%
Power Plants 360 390 -8%
Services 452 463 -2%
Net sales, total 1 036 1 131 -8%
Net sales for the review period by business
MEUR 1-6/2011 1-6/2010 Change 2010
Ship Power 517 554 -7% 1 201
Power Plants 710 627 13% 1 525
Services 890 872 2% 1 823
Net sales, total 2 119 2 052 3% 4 553
FINANCIAL RESULTS
The second quarter operating result before nonrecurring expenses totalled EUR
117 million (117), which is 11.3% of net sales (10.4). For the review period
January-June 2011, the operating result before nonrecurring expenses was EUR
230 million (211), which is 10.9% of net sales (10.3). Including nonrecurring
expenses, the operating result was EUR 219 million or 10.3% of net sales.
Wärtsilä recognised EUR 12 million (56) of nonrecurring expenses related to the
restructuring measures during the review period January-June 2011.
Financial items amounted to EUR -4 million (3). Net interest totalled EUR -2
million (-5). Dividends received totalled EUR 2 million (7). Profit before taxes
amounted to EUR 215 million (158). Taxes in the reporting period amounted to EUR
66 million (45). Earnings per share after nonrecurring expenses were EUR 0.73
(0.55) and equity per share was 7.66 euro (7.37).
BALANCE SHEET, FINANCING AND CASH FLOW
Cash flow from operating activities for January-June 2011 totalled EUR 84
million (270). Net working capital at the end of the period totalled EUR 276
million (314). Advances received at the end of the period totalled EUR 603
million (EUR 620 million at the end of the previous quarter). Cash and cash
equivalents at the end of the period amounted to EUR 541 million (331). Net
interest-bearing loan capital totalled EUR 64 million (328).
Wärtsilä had interest bearing debt totalling EUR 607 million (678) at the end
of June 2011. The existing funding programmes include long-term loans of EUR 523
million, unutilised Committed Revolving Credit Facilities totalling
EUR 520 million and Finnish Commercial Paper programmes totalling
EUR 700 million. The total amount of short-term debt maturing within the next
12 months is EUR 84 million.
The solvency ratio was 40.4% (38.1) and gearing was 0.04 (0.24).
CAPITAL EXPENDITURE
Gross capital expenditure in the review period totalled EUR 44 million (36),
which comprised EUR 16 million (4) in acquisitions and investments in
securities, and EUR 28 million (32) in intangible assets and property, plant and
equipment. Depreciation amounted to EUR 57 million (58).
Maintenance capital expenditure for 2011 will be in line with or slightly above
depreciation. Possible acquisition opportunities may affect capital expenditure
for the year.
STRATEGIC STEPS, ACQUISITIONS AND EXPANSION OF NETWORK
In July, after the review period, Wärtsilä acquired Cedervall, one of the
leading manufacturers of shaft seal and bearing systems for the marine industry.
Cedervall is headquartered Gothenburg, Sweden, and the company has subsidiaries
in Spain, China and Singapore, and manufacturing facilities in Sweden, China and
Spain. This acquisition strengthens Wärtsilä's leading position in the global
services market, in line with its strategy. The combination of Wärtsilä's and
Cedervall's businesses will create the market leader for oil & water lubricated
seals and bearings, and sterntubes. In 2010, the company's annual net sales
were SEK 344 million (EUR 39 million) and the company employs 211 people. The
acquisition is subject to relevant regulatory approvals, which are expected
during the third quarter of 2011.
Wärtsilä Corporation and Metso Corporation have signed an agreement to co-
operate in the development and delivery of scrubber systems for marine
applications. Under the terms of this agreement, Metso is to supply the scrubber
unit, while Wärtsilä is responsible for world-wide sales and for integrating
complete, certified and documented marine scrubber systems, including the
automation, water treatment, and ancillaries. This co-operation creates the
capability to ramp up production to meet future demand arising from increasingly
stringent emission regulations.
In June 2011, Wärtsilä and Jiangsu CuiXing Marine Offshore Engineering Co. Ltd.
agreed to establish a joint venture for manufacturing Wärtsilä 26 and Wärtsilä
32 medium-speed marine engines in China. The value of Wärtsilä's investment in
the joint venture is EUR 16 million. Wärtsilä's share of the joint venture is
49% and Jiangsu CuiXing's share 51%. The joint venture's production facilities
in the Rugao city of Nantong, Jiangsu province in Eastern China, will focus on
the assembly and testing of engines. Operations are planned to start in early
2013. The agreement is subject to relevant regulatory approvals, which are
expected during the third quarter of 2011.
During the second quarter, Wärtsilä opened a new workshop in Gdansk, Poland. In
addition to advanced engine service work, the new workshop will also provide
fuel system overhauls and overhauls of bow thruster units. Located close to the
Polish shipyards and ports, the workshop further strengthens Wärtsilä's presence
in the Baltic Sea area and its position as the leading services provider for
shipping customers visiting Poland.
RESTRUCTURING PROGRAMMES
In 2009, Wärtsilä began the process of adapting its activities to lower demand
through various restructuring measures with the aim of reducing approximately
1,800 persons. To date the total number of personnel has been reduced by more
than 1,700.
When fully implemented, it is estimated that the reductions will decrease costs
by approximately EUR 130 million. Of these cost savings, about EUR 60 million
had materialised by the end of 2010. The remainder of the savings will gradually
materialise during 2011. Wärtsilä anticipates that the majority of these cost
savings will be permanent. The total nonrecurring costs related to the
restructuring will be approximately EUR 150 million, out of which EUR 115
million has been recognised by the end of 2010. In the review period January-
June 2011, Wärtsilä recognised EUR 12 million (56) of nonrecurring items related
to the restructuring measures. The remainder of the costs will be recognised
during 2011.
PERSONNEL
Wärtsilä had 17,654 (17,905) employees at the end of June 2011. The average
number of personnel for January-June 2011 totalled 17,585 (18,295). Ship Power
employed 961 (1,010) people. Power Plants employed 811 (851) people, Services
11,083 (11,318) and Wärtsilä Industrial Operations 4,022 (4,328) people.
Of Wärtsilä's total employees, 19% (18) were located in Finland, 6% (8) in the
Netherlands and 29% (31) in the rest of Europe. Personnel employed in Asia
represented 33% (30), out of which 7% (6) were in China, in India 7% (6), in
Singapore 4% (5), and in the rest of Asia 15% (12).
MANUFACTURING
In June 2011 Wärtsilä CME Zhenjiang Propeller Co. Ltd., the joint venture
company of Wärtsilä and Zhenjiang CME Ltd., inaugurated its new manufacturing
facilities for Controllable Pitch propellers in Zhenjiang, China. The majority
of the new factory's manufacturing equipment was transferred from the Wärtsilä
factory in Drunen, the Netherlands, where production was closed in 2010. The
first deliveries from the new factory will take place later this year.
Activities in Wärtsilä's joint venture with Transmashholding in Russia are
proceeding according to plan. The joint venture is preparing to manufacture
modern and multipurpose diesel engines, including a new and technically advanced
version of the Wärtsilä 20 engine, to be used in shunter locomotives and for
various marine and power applications.
RESEARCH & DEVELOPMENT
Wärtsilä and Versa Power Systems, a leading developer of environmentally
friendly, high-power solid oxide fuel cells (SOFC), announced a co-operative
agreement to develop and integrate Versa Power's SOFC technology into Wärtsilä
products. A key target of the agreement is to develop commercial Wärtsilä fuel
cell products that generate power and heat for various applications in the
distributed energy and marine markets.
Wärtsilä has strengthened its offering in the mid-size, low-speed engine sector
by adding new 62- and 72-bore engines to its portfolio. These standardised
engines offer high propulsion efficiency, reliability, and optimised total cost
of ownership for customers in the bulker, tanker, and feeder container markets.
The first 62-bore engine will be available for delivery in September 2013 and
the first 72-bore engine will be available approximately one year later. All
Wärtsilä licensees will have the right to build the new engines. At launch, the
new engines are IMO Tier II compatible and available with IMO Tier III
solutions.
Wärtsilä has initiated a major project to further develop its low-speed engine
portfolio to include gas engines. For this purpose, a new test engine has been
installed in the Trieste engine laboratory in Italy. Engine testing was
initiated during the second quarter.
SUSTAINABLE DEVELOPMENT
Wärtsilä is well positioned to reduce the use of natural resources and
emissions, thanks to its various technologies and specialised services.
Wärtsilä's R&D efforts continue to focus on the development of advanced
environmental technologies and solutions. The company is committed to supporting
the UN Global Compact and its principles with respect to human rights, labour,
the environment and anti-corruption. Wärtsilä's share is included in several
sustainability indexes.
In April, Wärtsilä entered into co-operation with Crisis Management Initiative,
an independent non-profit organisation, led by Nobel Peace Prize laureate Martti
Ahtisaari. By promoting CMI's activities in conflict resolution and sustainable
peace building Wärtsilä supports the creation of a stable business environment
globally.
CHANGES IN MANAGEMENT
Wärtsilä's Board of Directors has appointed Mr Björn Rosengren M.Sc. (Tech.),
born 1959, as the new President and CEO of Wärtsilä Corporation, with effect
from 1 September 2011. Mr Rosengren will succeed Mr Ole Johansson, who will, at
that time, exercise his right to retire at the age of 60.
SHARES AND SHAREHOLDERS
The figures in the table below have been adjusted to reflect the increased
number of shares resulting from the free share issue approved by Wärtsilä
Corporation's Annual General Meeting on 3 March 2011.
Shares on the Helsinki Exchange
30 June 2011 Number of Number of Number of shares traded
shares votes 1-6/2011
--------------------------------------------------------------------------------
WRT1V 197 241 130 197 241 130 80 412 603
1 Jan. -30 June 2011 High Low Average 1) Close
--------------------------------------------------------------------------------
Share price 29.55 21.12 26.26 23.29
1) Trade-weighted average price
30 June 2011 30 June 2010
----------------------------------------------------------------------
Market capitalisation, EUR 4 594 3 695
million
Foreign shareholders 50.0% 48.2%
Flagging notifications
During the review period January-June 2011, Wärtsilä was informed of the
following changes in ownership:
On 5 January 2011, BlackRock, Inc. increased its holding in Wärtsilä
Corporation. Following the transaction BlackRock, Inc owned 4,941,593 shares or
5.01% of Wärtsilä's share capital and total votes.
DECISIONS TAKEN BY THE ANNUAL GENERAL MEETING
Wärtsilä's Annual General Meeting held on 3 March 2011 approved the financial
statements and discharged the members of the Board of Directors and the
company's President & CEO from liability for the financial year 2010. The
Meeting approved the Board of Directors' proposal to pay a dividend of EUR 1.75
per share and an extra dividend of EUR 1.00 per share, totalling EUR 2.75 per
share. The dividend was paid on 15 March 2011.
The Annual General Meeting decided that the Board of Directors shall have nine
members. The following were elected to the Board: Ms Maarit Aarni-Sirviö, Mr
Kaj-Gustaf Bergh, Mr Alexander Ehrnrooth, Mr Paul Ehrnrooth, Mr Lars Josefsson,
Mr Bertel Langenskiöld, Mr Mikael Lilius, Mr Markus Rauramo and Mr Matti Vuoria.
Authorized public accountants KPMG Oy Ab were appointed as the company's
auditors for the year 2011.
Free share issue
The Annual General Meeting decided to approve the free share issue in accordance
with the proposal of the Board of Directors. The free share issue was
implemented by applying the pre-emptive right of the shareholders so that for
each old share one new share was issued. Thereby a total of 98,620,565 new
shares were issued. The new shares were registered in the trade register on 8
March 2011.
Organisation of the Board of Directors
The Board of Directors of Wärtsilä Corporation elected Mikael Lilius as its
chairman and Matti Vuoria as the deputy chairman. The Board decided to establish
an Audit Committee, a Nomination Committee and a Remuneration Committee. The
Board appointed from among its members the following members to the Committees:
Audit Committee:
Chairman Markus Rauramo, Maarit Aarni-Sirviö, Alexander Ehrnrooth, Bertel
Langenskiöld
Nomination Committee:
Chairman Mikael Lilius, Kaj-Gustaf Bergh, Lars Josefsson, Matti Vuoria
Remuneration Committee:
Chairman Mikael Lilius, Paul Ehrnrooth, Matti Vuoria
RISKS AND BUSINESS UNCERTAINTIES
Risk of slowdown in the global economy continues to present a threat for
shipping and shipbuilding. For Ship Power, the main risk is the slippage of
shipyard delivery schedules.
In the Power Plants business, uncertainty in the financial markets may impact
the timing of bigger projects.
The returning uncertainty in the financial markets as well as unrest in the
Middle East and North Africa may have a negative impact on Services' order
intake, especially for larger power plant conversion projects.
The annual report for 2010 contains a thorough description of Wärtsilä's risks
and risk management.
MARKET OUTLOOK
Ship Power
Vessel ordering activity is expected to remain lower than during the previous
year. This is mainly due to lower activity in the bulk carriers markets. The
shift towards more robust contracting activity for specialised tonnage benefits
Wärtsilä Ship Power due to its strong presence in these markets. Demand for LNG
fuelled vessels in several segments continues to pick up. Wärtsilä is unrivalled
in this market, with the most extensive range of engines safely operating on LNG
and a complete portfolio of products and solutions. In Ship Power, orders for
LNG carriers have resumed and a significant number of new engine orders are
expected to materialise during the remainder of the year. Dual-fuel engine
orders for LNG carries are booked as the joint venture Wärtsilä Hyundai Engine
Company Ltd's order intake. Competition and price pressure among shipbuilding
suppliers is expected to remain intense. Wärtsilä expects Ship Power's order
intake in 2011 to be significantly better than in the previous year.
Power Plants
Recovery in the power generation market is expected to continue during 2011.
Growing emerging markets will continue to invest in new power generation
capacity, which will increase demand especially in the flexible baseload
segment. The ramp down of older coal based generation, and uncertainty over
nuclear power, will increase the demand for gas based generation in the medium
to long term. This is supported by the production of shale gas in the US, and
the expectation that natural gas prices will remain competitive. Wärtsilä
expects Power Plants' order intake to increase in 2011 compared to the previous
year.
Services
Uncertainty over economic development has increased, especially in Europe. The
service market outlook is strongest in the Middle East, Asia and the Americas,
which is in line with economic growth in these areas. The outlook for the
offshore and container markets is good, however the short term outlook is bleak
in the tanker and bulker markets. While Wärtsilä expects steady demand for power
plant services, the overall marine service market is still expected to suffer
from overcapacity and the high anchored fleet level in 2011.
WÄRTSILÄ'S PROSPECTS FOR 2011 REVISED
Due to weaker than expected marine service markets and the timing of power plant
deliveries, Wärtsilä expects its net sales for 2011 to decline by 0-5% compared
to last year. We reiterate our expectation that operational profitability (EBIT%
before nonrecurring items) will be around 11%.
WÄRTSILÄ INTERIM REPORT JANUARY-JUNE 2011
This interim financial report is prepared in accordance with IAS 34 (Interim
Financial Reporting) using the same accounting policies and methods of
computation as in the annual financial statements for 2010. All figures in the
accounts have been rounded and consequently the sum of individual figures can
deviate from the presented sum figure.
Use of estimates
The preparation of the financial statements in accordance with IFRS requires
management to make estimates and assumptions that affect the valuation of the
reported assets and liabilities and other information, such as contingent
liabilities and the recognition of income and expenses in the income statement.
Although the estimates are based on the management's best knowledge of current
events and actions, actual results may differ from the estimates.
IFRS amendments
Of the amended International Financial Reporting Standards (IFRS) and
interpretations mandatory as of 1 January 2011 the following are applicable on
the Group reporting:
* Amendment to IAS 32 Financial instruments: Presentation - Classification of
Rights Issues
* Revised IAS 24 Related Party Disclosures
The adaption of the revised standards and interpretations does not have any
material effect on the interim report.
This interim report is unaudited. All share related financial ratios and their
comparison figures have been calculated based on the new amount of shares.
CONDENSED INCOME STATEMENT
MEUR 1-6/2011 1-6/2010 2010
--------------------------------------------------------------------------------
Net sales 2 119 2 052 4 553
Other operating income 14 18 52
Expenses -1 862 -1 859 -4 082
Depreciation, amortisation and impairment -57 -58 -116
Share of result of associates and joint ventures 4 1 5
Operating result 219 155 412
Financial income and expenses -4 3 -13
Net income from financial assets available for sale 149
Profit before taxes 215 158 548
Income taxes -66 -45 -151
--------------------------------------------------------------------------------
Profit for the financial period 149 114 397
--------------------------------------------------------------------------------
Attributable to:
Owners of the parent 144 109 386
Non-controlling interests 4 5 11
--------------------------------------------------------------------------------
Total 149 114 397
--------------------------------------------------------------------------------
Earnings per share attributable to equity holders of the parent company:
--------------------------------------------------------------------------------
Earnings per share, EUR (basic and diluted) 0.73 0.55 1.96
--------------------------------------------------------------------------------
STATEMENT OF COMPREHENSIVE INCOME
Profit for the financial period 149 114 397
Other comprehensive income after tax:
Exchange differences on translating foreign operations -10 22 17
Financial assets available for sale 17
fair valuation 6 30
transferred to statement of income -110
Cash flow hedges 3 -14 -9
Share of other comprehensive income of associates and joint ventures 1
--------------------------------------------------------------------------------
Other comprehensive income -2 24 -71
--------------------------------------------------------------------------------
Total comprehensive income for the period 147 138 326
--------------------------------------------------------------------------------
Total comprehensive income attributable to:
Owners of the parent 145 131 313
Non-controlling interests 3 7 13
--------------------------------------------------------------------------------
147 138 326
CONDENSED STATEMENT OF FINANCIAL POSITION
MEUR 30 Jun. 2011 30 Jun. 2010 31 Dec. 2010
--------------------------------------------------------------------------------
Non-current assets
Intangible assets 764 787 780
Property, plant and equipment 433 461 466
Investments in associates and joint
ventures 83 62 65
Financial assets available for sale 26 179 18
Deferred tax receivables 121 95 122
Other receivables 32 30 32
--------------------------------------------------------------------------------
1 459 1 614 1 483
Current assets
Inventories 1 267 1 590 1 244
Other receivables 1 128 1 202 1 192
Cash and cash equivalents 541 331 776
--------------------------------------------------------------------------------
2 937 3 122 3 213
--------------------------------------------------------------------------------
Total assets 4 396 4 737 4 696
--------------------------------------------------------------------------------
Equity
Share capital 336 336 336
Other equity 1 175 1 118 1 302
--------------------------------------------------------------------------------
Total equity attributable to equity
holders of the parent 1 511 1 454 1 638
Non-controlling interests 21 21 26
--------------------------------------------------------------------------------
Total equity 1 533 1 476 1 664
Non-current liabilities
Interest-bearing debt 523 599 572
Deferred tax liabilities 63 95 70
Other liabilities 179 211 189
--------------------------------------------------------------------------------
766 905 831
Current liabilities
Interest-bearing debt 84 79 56
Other liabilities 2 014 2 277 2 145
--------------------------------------------------------------------------------
2 098 2 356 2 201
Total liabilities 2 864 3 261 3 032
--------------------------------------------------------------------------------
Total equity and liabilities 4 396 4 737 4 696
--------------------------------------------------------------------------------
CONDENSED CASH FLOW STATEMENT
MEUR 1-6/2011 1-6/2010 2010
--------------------------------------------------------------------------------
Cash flow from operating activities:
Profit for the financial period 149 114 397
Depreciation, amortisation and impairment 57 58 116
Financial income and expenses 4 -3 13
Selling profit and loss of fixed assets and other changes 4 -147
Share of result of associates and joint ventures -4 -1 -5
Income taxes 66 45 151
Changes in working capital -52 238 370
--------------------------------------------------------------------------------
Cash flow from operating activities before financial
items and taxes 219 453 896
Financial items and paid taxes -135 -184 -233
--------------------------------------------------------------------------------
Cash flow from operating activities 84 270 663
--------------------------------------------------------------------------------
Cash flow from investing activities:
Investments in shares and acquisitions -16 -4 -6
Net investments in property, plant and equipment and
intangible assets -28 -31 -83
Proceeds from sale of financial assets available for sale 3 173
Cash flow from other investing activities 2 10 -5
--------------------------------------------------------------------------------
Cash flow from investing activities -39 -25 79
--------------------------------------------------------------------------------
Cash flow from financing activities:
Proceeds from non-current borrowings 26 37
Repayments and other changes in non-current loans -9 -27 -76
Changes in current loans and other changes 13 6 -2
Dividends paid -278 -175 -175
--------------------------------------------------------------------------------
Cash flow from financing activities -274 -171 -216
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Change in cash and cash equivalents, increase (+) /
decrease (-) -229 74 525
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 776 244 244
Exchange rate changes -6 12 7
Cash and cash equivalents at end of period 541 331 776
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
Total equity attributable to equity holders of
MEUR the parent Non-
controlling Total
interests equity
-------------------------------------------------------------------------------- Fair
Share value
Share issue Translation and other Retained
capital premium differences reserves earnings
--------------------------------------------------------------------------------
Equity on 1
January 2011 336 61 8 12 1 221 26 1 664
Dividends -271 -7 -278
Total
comprehensive
income for the
period -8 9 144 3 147
--------------------------------------------------------------------------------
Equity on 30
Jun. 2011 336 61 -1 21 1 094 21 1 533
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Equity on 1
January 2010 336 61 -6 99 1 006 16 1 512
Dividends -173 -2 -175
Total
comprehensive
income for the
period 19 3 109 7 138
--------------------------------------------------------------------------------
Equity on 30
Jun. 2010 336 61 13 102 942 21 1 476
--------------------------------------------------------------------------------
GEOGRAPHICAL AREAS Europe Asia Americas Other Total
MEUR
---------------------------------------------------
Net sales 1-6/2011 695 964 272 187 2 119
Net sales 1-6/2010 578 739 473 262 2 052
---------------------------------------------------
INTANGIBLE ASSETS AND PROPERTY, PLANT & EQUIPMENT
MEUR 1-6/2011 1-6/2010 2010
-----------------------------------------------------------------
Intangible assets
Book value at 1 January 780 779 779
Changes in exchange rates -5 21 20
Additions 10 7 17
Amortisation and impairment -22 -21 -42
Disposals and intra-balance sheet transfer 1 6
-----------------------------------------------------------------
Book value at end of period 764 787 780
-----------------------------------------------------------------
Property, plant and equipment
Book value at 1 January 466 457 457
Changes in exchange rates -5 18 14
Additions 18 25 75
Depreciation and impairment -35 -37 -73
Disposals and intra-balance sheet transfer -10 -2 -6
-----------------------------------------------------------------
Book value at end of period 433 461 466
-----------------------------------------------------------------
GROSS CAPITAL EXPENDITURE
MEUR 1-6/2011 1-6/2010 2010
----------------------------------------------------------------------------
Investments in securities and acquisitions 16 4 6
Intangible assets and property, plant and equipment 28 32 92
----------------------------------------------------------------------------
Total 44 36 98
----------------------------------------------------------------------------
INTEREST-BEARING LOAN CAPITAL
MEUR 1-6/2011 1-6/2010 2010
----------------------------------------------------------------------------
Non-current liabilities 523 599 572
Current liabilities 84 79 56
Loan receivables -2 -20 -17
Cash and cash equivalents -541 -331 -776
----------------------------------------------------------------------------
Net 64 328 -165
----------------------------------------------------------------------------
FINANCIAL RATIOS 1-6/2011 1-6/2010 2010
----------------------------------------------------------------------------
Earnings per share, EUR (basic and diluted) 0.73 0.55 1.96
Equity per share, EUR 7.66 7.37 8.30
Solvency ratio, % 40.4 38.1 40.8
Gearing 0.04 0.24 -0.09
----------------------------------------------------------------------------
PERSONNEL 1-6/2011 1-6/2010 2010
----------------------------------------------------------------------------
On average 17 585 18 295 18 000
At end of period 17 654 17 905 17 528
----------------------------------------------------------------------------
CONTINGENT LIABILITIES
MEUR 1-6/2011 1-6/2010 2010
------------------------------------------------------------
Mortgages 57 56 59
Chattel mortgages 17 18 18
------------------------------------------------------------
Total 74 74 77
------------------------------------------------------------
Guarantees and contingent liabilities
on behalf of Group companies 508 681 623
on behalf of associated companies 9 9 9
Nominal amount of rents according
to leasing contracts 70 79 74
------------------------------------------------------------
Total 587 770 706
------------------------------------------------------------
NOMINAL VALUES OF DERIVATIVE INSTRUMENTS
MEUR Total amount of which closed
---------------------------------------------------------------
Interest rate swaps 20
Foreign exchange forward contracts 1 168 230
Currency options, purchased 57
---------------------------------------------------------------
CONDENSED STATEMENT OF
INCOME, QUARTERLY
MEUR 4-6/2011 1-3/2011 10-12/2010 7-9/2010 4-6/2010 1-3/2010
--------------------------------------------------------------------------------
Net sales 1 036 1 083 1 462 1 039 1 131 922
Other operating
income 4 10 21 13 11 7
Expenses -906 -956 -1 313 -910 -1 007 -851
Depreciation,
amortisation and
impairment -28 -29 -29 -29 -28 -30
Share of result of
associates and joint
ventures 1 3 2 2 2
Operating result 108 111 143 114 105 49
Financial income and
expenses -4 -10 -6 4
Net income from
financial assets
available for sale 117 32
Profit before taxes 108 107 251 140 109 49
Income taxes -35 -31 -71 -35 -31 -14
--------------------------------------------------------------------------------
Profit for the
financial period 73 76 179 104 79 35
--------------------------------------------------------------------------------
Attributable to:
Owners of the parent 70 74 176 101 76 32
Non-controlling
interests 2 2 4 3 3 2
--------------------------------------------------------------------------------
Total 73 76 179 104 79 35
--------------------------------------------------------------------------------
Earnings per share attributable to equity
holders of the parent company:
--------------------------------------------------------------------------------
Earnings per share,
EUR 0.35 0.38 0.89 0.51 0.39 0.16
--------------------------------------------------------------------------------
CALCULATION OF FINANCIAL RATIOS
Earnings per share (EPS)
Profit for the period attributable to equity holders of the parent
company
-------------------------------------------------------------------------
Adjusted number of shares over the period
Equity per share
Equity attributable to equity holders of the parent company
-------------------------------------------------------------------------
Adjusted number of shares at the end of the period
Solvency ratio
Equity
-------------------------------------------------------------------------x 100
Total equity and liabilities - advances received
Gearing
Interest-bearing liabilities - cash and cash equivalents
-------------------------------------------------------------------------
Equity
19 July 2011
Wärtsilä Corporation
Board of Directors
[HUG#1532170]
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